When this bull run began in March 2009, telecom stocks fetched just 9.2 times what phone companies had earned over the preceding 12 months, according to data from Bespoke Investment Group. By last week, that had jumped to 23 times -- the biggest increase of any sector excluding financials, and a sign that telecom stocks are rising much faster than their earnings. In contrast, the price/earnings multiple for consumer discretionary companies barely ticked up from 17.6 to 18.1, and while those stocks are up a whopping 200%, profits have risen in lock step with rallying shares.

Our eagerness to pay more for each dollar earned by telecom companies is understandable. We live in an information age of unlimited calling, incessant Web-surfing, and even occasional sexting, and telecom profits are growing unspectacularly but steadily. All those smartphones and tablets lock in monthly payments over years, and such stability and phone companies' rich dividends are especially attractive in these times of economic uncertainty and low interest rates.

The problem? The bullish case is already heard loud and clear. Telecom companies pay out more dividends than ever, but average yield has shrunk to 5.1% from 7% in 2010 as stocks surged. Smartphone sales are still growing worldwide, but the year-over-year pace has slowed to 42% this year from 76% in 2010, says IDC. And the U.S. already has more mobile phones than there are people.

Just last week,
Verizon Communicationsvz -0.997557003257329%Verizon Communications Inc.U.S.: NYSEUSD48.63
-0.49-0.997557003257329%
/Date(1427835638700-0500)/
Volume (Delayed 15m)
:
12352840AFTER HOURSUSD48.63
%
Volume (Delayed 15m)
:
418672
P/E Ratio
19.297619047619047Market Cap
204113646499.045
Dividend Yield
4.523956405511002% Rev. per Employee
716746More quote details and news »vzinYour ValueYour ChangeShort position
(ticker: VZ) said its wireless unit snagged 1.5 million new contract customers in the third quarter, the most in four years. Yet gains likely came at the expense of rivals and do not suggest an industry growth spurt. Meanwhile, the percentage of wireless-only U.S. households has burgeoned to 32% from 11% over the past five years, and kids today think that landline phones are what Grandma used to dial the milkman once upon a time.

Margin expectations already look high across the stock market. While margins shouldn't collapse, short of a recession, forecasts for S&P 500 profits to grow 11% in 2013 on scant revenue growth assume that margins will expand 0.3 of a percentage point and companies will buy back 3% of shares. That looks aggressive, says Dan Suzuki, BofA Merrill Lynch's U.S. equity strategist. "Even at the peak of buyback activity in 2008, we estimate that S&P 500 companies had net purchases of less than 2%."

Assumptions look most zealous in telecom, where 2013 forecasts anticipate margin expansion of 1.27 percentage points, or an 18% reduction in share count, or some combination of the two. Back in 2008, the telecom sector never bought back more than 2.5% of its shares.

Expectations matter less if stocks are cheap. But Verizon trades at 19.2 times trailing profits, the highest in more than a decade, and AT&T's (T) multiple is near the highest since 2005. While Softbank's highly leveraged $20 billion lunge at
Sprint Nextel s -0.21052631578947367%Sprint Corp.U.S.: NYSEUSD4.74
-0.01-0.21052631578947367%
/Date(1427835654497-0500)/
Volume (Delayed 15m)
:
12919943AFTER HOURSUSD4.739
-0.00100000000000033-0.02109704641350211%
Volume (Delayed 15m)
:
24026
P/E Ratio
N/AMarket Cap
18799745056.1523
Dividend Yield
N/ARev. per Employee
931368More quote details and news »sinYour ValueYour ChangeShort position
(S) is supposed to energize the No. 3 network, don't hold your breath. The parts that make up Sprint had invested just $28.6 billion in its wireless network over the past decade, behind $59 billion spent by AT&T and $65 billion by Verizon, says HSBC. The undercapitalized platform won't easily improve given Sprint's necessary position as "a price leader, offering unlimited data while its stronger peers have moved to tiered data plans."

Phone companies would like to keep you on hold a bit longer. The fourth quarter -- crammed with holidays, family calls, and the giving of gadgets that require service contracts -- can ring in a very happy new year. Gains by Republicans this November also could keep the tax rate on dividends near a low 15% and ease federal regulation. And any dithering in Washington on the fiscal cliff could drive investors toward defensive havens like telecom. When that happens, sell into strength and take some profits.

After all, hide-outs work best when they aren't crowded. If bond yields follow the lead of rallying bank and home-builder stocks, more investors might start hanging up on the sector.